The European Parliament and EU member states are completely deadlocked over new biofuels legislation. Although the Parliament may decide this week to start negotiations with member states, the two camps are so far apart that a deal seems almost inconceivable before 2015. The regulatory uncertainty is threatening to paralyse the European biofuels sector – and even to kill off progress in “advanced” (climate-friendly) biofuels. Sonja van Renssen reports from Brussels.
Photo: Trees ForTheFuture via Flickr
When the EU adopted a 10% renewables in transport target in 2009, it helped lay the foundations for a European biofuel market. That target was adopted as part of the EU’s climate and energy package in the heyday of climate action and its goal was to reduce greenhouse gas emissions in transport. Since 2009, this neat logic has been turned on its head. Scientific studies suggest that not all biofuels are created equal and that some may actually be worse for climate change than conventional diesel.
The problem can be summed up in three words: indirect land-use change, or ILUC. This is the indirect displacement of forest or other carbon-rich land by crops grown for energy. The result can be a net increase in greenhouse gas emissions. The evidence is particularly damning for biodiesel feedstocks, such as oilseed rape, which is exactly where many European producers have put their money since Europe is after all predominantly a diesel (and therefore biodiesel) rather than petrol (and therefore bioethanol) market.
So when the European Commission put out a proposal to address ILUC in EU law a year ago, the biodiesel industry in particular revolted. But bioethanol producers stood shoulder-to-shoulder with their colleagues (and often business partners). Behind them both loomed the farm lobby. It is agriculture ministers, not environment and energy ministers, who are calling the shots on this file. For farmers, biofuels make sense on a lot of levels, from offering a new revenue stream to rural development opportunities to providing co-products for animal feed.
A farmer doesn’t care if he’s growing crops for food or fuel – he wants to make the maximum return on investment per hectare. And because of the 10% renewables in transport target – backed by national subsidies – biofuels have been an attractive investment. Fast forward to today and Europe’s fledgling biofuel industry is accusing EU policymakers of a U-turn, even as environmental critics ask how the EU can continue to promote biofuels when it now knows some of them may actually cause climate change.
Parliament lays out its cards
If there is one person who is at the heart of the dispute in Brussels it is French liberal MEP Corinne Lepage. She is rapporteur (or head MEP) on the European Commission’s proposal in the European Parliament and therefore in charge of building a common position there, before she will take the lead in negotiations with member states. The European Parliament and member states must agree on the file for it to become law.
In a vote on 11 September, Lepage won support from the full Parliament for a proposal that says of the 10% renewables in transport at most 6% may be derived from land-based biofuels and 2.5% must be from “advanced” biofuels (not crops). The proposal also included binding ILUC factors (more on those in a moment). What she did not win (by one vote) was a mandate to open negotiations with member states.
Lepage did not mince her words after the vote: “The worst is the uncertainty. Not being able to negotiate immediately with the European Commission and Council [of Ministers] is risking that the text won’t be adopted before the end of the mandate [of the Parliament and Commission in 2014], which is not good news for climate change and very bad for industry because it means no investment will be possible before 2015.”
This week, the Parliament’s coordinators will decide whether she gets a second shot at the mandate. But even if she does, a quick deal with member states seems highly unlikely – the two camps are simply too far apart. Moreover, Lepage has indicated she is not prepared to drop everything to get a deal. “Let’s be frank, I won’t fight for a text that changes nothing,” she said in an interview. “Then it’s better not to vote, to wait for a new Parliament and Commission.”
Her bottom line? “For me it’s unimaginable to go above [a] 6.5% cap and unimaginable that there are no ILUC factors. Unimaginable simply because at [a] 7% or 8% [cap] it’s business as usual, you change nothing. There’s no point in voting a text that changes nothing.”
Room for manoeuvre
The battle ahead is a tough one. Member states are reportedly considering a 7% cap on land-based biofuels, a 1% target for advanced biofuels and non-binding ILUC factors. What scope for compromise is there?
ILUC factors remain the most controversial element of Lepage’s position because, if adopted, they would effectively kill off the European biodiesel market. What are they? ILUC factors are feedstock-specific penalties for ILUC emissions. If applied from 2020 as Lepage envisages, biodiesel would not necessarily be any greener than normal diesel. That in turn means that fuel suppliers would no longer look to biodiesel as a means of meeting their own emission reduction target. Currently, fuel suppliers have an emission reduction obligation of 6% by 2020 under the EU’s Fuel Quality Directive, but longer-term obligations seem likely as part of a new climate and energy package for 2030. The 6% emission reduction target is generally believed to be a stronger driver of the European biofuels market than the 10% renewables in transport target.
Imke Luebbeke from WWF believes ILUC factors are an essential complement to a cap on land-based biofuels: “We need full accounting and a full view of all the emissions biofuels are creating. Capping is a market signal avoiding the worst, but also with better biofuels and under the cap, we have to be sure only those [biofuels] come to the market that are better than fossil fuels.”
However, defenders of the existing European biofuel industry argue that ILUC science is far from set in stone and is too immature to be used in policy-making. Lepage proposes to review the science on ILUC in 2016. At the same time, she wants policymakers to agree now that binding ILUC factors will apply from 2020. But only a handful of member states support her and even they see it as a lost cause.
On the cap, which Lepage raised from the Commission’s 5% to 6% and extended from food- to land-based biofuels (i.e. including dedicated energy crops such as fast-growing trees or the grass Miscanthus), member states are prepared to move perhaps a smidgeon to 6.5%, suggests a source close to the talks.
On the target for advanced biofuels, such as those made from waste, 1% is likely to be member states’ best offer. Many may be looking to the US and the unmet advanced biofuels target there as a lesson in overzealous ambition. Yet at the same time a yet-to-be-published study by the International Council on Transportation (ICCT), calculates that in principle, 13% of Europe’s road transport fuel could come from waste by 2020. Co-author Chris Malins suggests at least part of this technical potential could be mobilised through a target for advanced biofuels combined with grants, loan guarantees and/or tax incentives.
So far, the EU has tried to incentivise advanced biofuels by letting them count extra towards member states’ renewables targets, but many in the industry, such as enzyme maker Novozymes, say this “double counting” has not worked. They favour a target. Compared to 13%, 2.5% is little and 1% even less, but at least it sets a direction. A target for advanced biofuels is also the only kind of biofuels target imaginable as part of a new EU climate and energy package for 2030.
Aligning different agendas
At the moment therefore, the ILUC issue hangs in the balance. And that, says Kåre Riis Nielsen at Novozymes, is “bad news for industry and investors who need clarity.” According to Riis Nielsen, “ongoing regulatory uncertainty is jeopardizing all the parallel EU efforts to attract investments in innovative renewable energy technologies, including in advanced biofuels.” These parallel efforts include a €3.8bn public-private partnership to develop bio-based industries announced by the Commission on 10 July.
But EU biofuel producers have stressed the ILUC issue itself in their criticisms rather than the uncertainty they are faced with. “The rather indecisive results seen today [11 September] show that doubt persists in using a rather young discipline for policy-making,” said Raffaello Garofalo, Secretary General of the European Biodiesel Board (EBB). Just a week earlier, the EBB had released a study showing that the ILUC impacts associated with biodiesel production from rapeseed oil could be up to 95% lower than the Commission estimates.
The bioethanol sector too, lambasted the 6% cap before welcoming a new sub-target for bioethanol (introduced by Lepage) as well as the 2.5% target for advanced biofuels.
Farming lobby Copa-Cogeca argues that the 6% cap “threatens the future of the EU biofuels industry and ignores the reality of biofuel production… [and] jeopardises the EU’s energy and climate change targets, feed supplies for animals and 200,000 jobs.” Lepage calls the latter charge “misinformation, pure and simple”. The EU biofuel industry today makes up 4.8% of the transport fuel market, so a 6% cap would allow further growth, not cut existing jobs, she says.
Environmental campaigners meanwhile warn that even what Parliament has put on the table is too little too late. Nuša Urbancic from the NGO Transport & Environment says: “Until an agreement is reached, it is uncertain for investors and the environment what the future of biofuels will be. What is certain though is that Europeans will have to keep paying for another seven years for biofuels that pollute more than the fossil fuels they are supposed to replace.”
This is also something the politician Lepage is acutely sensitive to: “We cannot continue having policies supposedly fighting climate change, when we know they have no impact on climate change. It’s mocking the world and European citizens.” With parliamentary elections next year, this is obviously the last thing she wants to do.
There is no obvious answer to the current dilemma in Brussels. The tide has turned and if biofuels have a future in Europe, it is in advanced biofuels. The problem is that advanced biofuels require a policy framework to get them going. And that’s exactly what the EU risks delaying.